UK Motor Finance Redress Scheme: Upper Tribunal Hearing Set for February 16-26, 2027 as Lenders Need Not Calculate or Pay Compensation Until Four Legal Challenges Are Decided, With November 18 Notification Deadline Still Live

The Financial Conduct Authority's motor finance redress scheme is moving through the legal system, not through payments. The FCA established the Motor Finance Commission Consumer Redress Scheme on March 30, 2026, using powers in sections 404 and 404A of the Financial Services and Markets Act. Four parties then challenged its lawfulness before the Upper Tribunal, and the Tribunal partly suspended the scheme. This article uses the FCA's legal challenge documents page as it stood on October 26, 2026, and reporting on the FCA's statement of October 13, 2026. The FCA page does not say which provisions are suspended, and this article does not claim to list them.

The challengers

The FCA's page names four applicants challenging the scheme under section 404D(1) of FSMA: CA Auto Finance UK Limited, Consumer Voice Limited, Mercedes-Benz Financial Services UK Limited, and Volkswagen Financial Services (UK) Limited. The Upper Tribunal, Tax and Chancery Chamber, has jurisdiction. Each applicant has published an application and a statement of grounds, and the FCA has published its grounds of response. Replies from the four applicants were added on September 1, 2026. According to the reporting reviewed, the FCA announced on May 1, 2026 that it had received the four challenges and that none was expressly brought in the name of individual consumers.

The suspension

The Tribunal suspended parts of the scheme on terms agreed between the FCA and the four challengers. The FCA's page dates the suspension order July 1, 2026, and lists a separate directions order of the same date. Other reporting gives July 2. The sources do not explain the discrepancy, and the FCA page, as the regulator's own record, is followed here for the order date. Which date is right does not change the effect described below.

The hearing

Directions issued after applications were heard on October 5 and 6, 2026. The FCA confirmed on October 13 that the Upper Tribunal will hear the four challenges from February 16 to 26, 2027. The final hearing is listed for nine days from February 16, with four additional days of judicial pre-reading. Further directions on expert evidence and disclosure were issued on October 12 and October 26. A judgment is expected in the months after the hearing.

What firms must and need not do

Under the partial suspension, lenders do not have to calculate or pay redress, or send compensation communications, until the Tribunal process concludes. They must still identify relevant complaints and agreements, gather data and tell complainants who are not owed compensation, subject to limited exceptions.

Two notification deadlines apply. The first is November 18, 2026, covering agreements from April 1, 2014 and complaints made by June 30, 2026. The second is January 18, 2027, covering earlier agreements and complaints made by August 31, 2026. Complaints made after those dates must be answered within five months. The FCA told firms to keep preparing and to progress complaints as far as possible.

If the scheme is quashed

The FCA has told lenders to plan for the possibility that the scheme is quashed in whole or in part. In that case, according to the reporting, there could be no motor finance compensation scheme and no pause on complaint handling. The FCA said lenders should hold appropriate capital and liquidity and warned that it could impose business restrictions otherwise. This is the regulator's guidance to firms, and the outcome of the hearing has not been decided.

Scale and timing

Reporting on the FCA's statements says the scheme is expected to return about £7.5 billion to consumers and that the vast majority of claims should be settled by the end of 2027. The same reporting says motor finance borrowing was £39 billion in 2024. These are the FCA's estimates and context figures, not outcomes. The reporting describes the period covered as running from 2007 to 2024, while the notification deadlines above refer to agreements from April 1, 2014 and earlier agreements, so the exact eligibility rules should be checked in the scheme rules and the FCA's policy statement, PS26/3.

The FCA described the scheme in March as "the quickest, fairest and most efficient way to compensate consumers" and said it will defend it robustly.

Advice for consumers

The reporting says that complaining to a lender is free, and that claims management firms may charge up to 36% of compensation. Customers who made a complaint should watch for a letter from their lender, particularly around the notification deadlines. A letter saying no compensation is owed is not necessarily the end of the matter, and the FCA's materials explain how complainants can respond, which this article has not reviewed in detail.

What is not known

The sources do not say which scheme provisions are suspended in detail, do not give the reasons for each challenger's case beyond the pleadings' existence, and do not say what the Tribunal will decide. Anyone relying on this timeline should check the FCA page for updates, because directions are issued regularly.